First we had the legs race. Then we had the arms race. Now we're going to have the brain race. And, if we're lucky, the final stage will be the human race.” - John Brunner

Algorithms are everywhere. They influence large parts of our lives, from job hunting to the type of ads we see. They are increasingly used in businesses to find trends and patterns. And they carry tremendous authority, since the manufacturers usually show how well the program performed, based on historical data. Yet the public is no authorized to see how the program defines the conditions to reach its conclusion. In fact, the algorithms are perceived as some kind of unbiased, all powerful and all knowing machines, acting neutrally and independently.

It is obviously not the case. The programming behind these software must simplify reality (reducing complexity = reducing the number of potential paths) and rely on historical data. Because of this, algorithms can make mistakes or produce unwanted results such as social fossilization. The poor will be at a clear disadvantage to receive a job and have higher punishment rates. This will impact their ability to secure home ownership and move upward in society.

The faith and money that is supporting the development of these new technologies is staggering, somewhat frightening. In a world where what you said is stored forever, your political statements may turn against you decades later. Your online life can become a liability. Hackers (from the government or independent) can take control of your history and probably harm you in more ways than you would imagine. The new technologies create as much troubles as they try to solve…

Science, General Knowledge & Environment

Heather Heyer’s cousin: Racism will get worse unless we stop it now – It takes the death of a white girl to raise awareness about racism in America, a phenomenon that didn’t disappear and apparently found a new life among young people. The fact that the police let hundreds of armed people chanting racist songs in the streets and the media dutifully brands them ‘free speech marches’ has something troubling. What if Hispanic or Afro-americans did the same? Terrorism.

Another Way the Rich Preserve Their Advantage: Grade Inflation in Private Schools – US private schools inflate the grades given to their students under the pressure of their parents who want the kids to go to better schools. At the same time, the SAT scores keep on declining.

Data Scientist Cathy O’Neil: “Algorithms Are Opinions Embedded in Code” – Very important. Algorithms are now everywhere and unchallenged. However, they rely on 2 factors: data (usually past data) and a definition of success, which can be based either on data or on the criteria selected by the programmer. This creates a situation where the data reproduces bad practices without room for positive change, with the high risk of further driving inequalities across social classes -and thereby races.

The Dark Side of China’s Tech Boom – Large Chinese tech companies control a large portion of their users’ daily lives and regularly hand over the data to the government, which builds algorithms to give social rating (reminiscent of Black Miror S3E1). Given the huge bias inherent to programming, we can expect further fossilization of the social classes inside the country.

The Latest Red Flag For U.S. Shale – US shale producers have cut costs in answer to low energy prices but still can’t show a profit. Meanwhile, land prices have gone up, labor is short and other factors are increasing their operational costs. As a result, some producers are investing back into old wells and investors are looking at other opportunities.

Mutual Funds Cut Uber Valuation by as Much as 15% – A refreshing take on Uber’s accelerating crash: mutual funds are writing down Uber’s valuation, Softbank is not interested in buying back existing shareholder’s stakes, and the media distorts facts to make up stories in an apparent bid to hold the valuation at current level.

The $199 billion problem: Ten US companies that could devastate Silicon Valley – 10 Silicon Valley ‘unicorns’ are valued over USD 5 billion each and only one may have a valuation supported by fundamentals. This means a lot of write downs may be in store for the asset managers, Venture Capitals and other investors who will eventually need to transform their paper money into actual dollars.

Silicon Valley is using H-1B visas to crowd out American minorities – Silicon Valley prefers to hire foreigners that are cheaper 8 out of 10 times rather than their fellow citizens. Among the rising number of IT graduates, citizens of color and female have a larger unemployment rate than white males.

Identity Thieves Hijack Cellphone Accounts to Go After Virtual Currency – By linking your phone to your accounts, you allow hackers to easily reset your phone’s password and steal your bitcoins… or worse.

Will Big Data Eat Hollywood’s Lunch? – To pay its creditors, Hollywood is relying only on a few blockbusters that use the same recipe and are distributed abroad, since the studios are unable to understand the new generations and what they want to pay for. Instead, companies such as Netflix are starting to produce original content using Big Data to increase their chances of success.

History & Geopolitics

Saudi Arabia’s attempt at a Qatari coup backfired – now wait for the blowback – Saudi Arabia induced crisis against Qatar wasn’t enough to topple the Qatari ruling family. But the failed coup is likely to be met with a revenge from Qatar, which happens to have several options at its disposal including former Arabian tribes that were sacked by the Saudi. We also note that this is Mohammad Bin Salman’s third blunder in 2 years, after aggressive decrease in oil prices that ended up threatening the country’s welfare system and the failed Yemen war.

Finance & Economics

Steve Bannon v. Blinkered Economists on “Free Trade” – More free trade bullshit from economists blind to the realities of power and politics. By focusing only on economic results, economists miss out on the fact that free trade may favor one side more than the other and eventually lead the winning side to achieve superior power onto the other part. Jobless workers in industrialized countries are thrilled to learn that Chinese peasants have increased their living standards by doing their factory jobs… or not.

Wall Street Banks Warn Downturn Is Coming – A number of indicators suggest that the various security markets are nearing the peak of a bubble, a sign that a correction may start soon.

China’s reliance on infrastructure stimulus at record high – China’s local government have become heavily indebted as they continue to borrow (using legal loopholes) to fund infrastructure projects. Given the low return on investment and the fact that the country has an excess capacity of infrastructure, we shall expect these investments to fail as soon as the debtor capacity to roll over its loans ends.

Picture of the week: Hurricane Harvey devastates southeast Texas

About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi